DBP refinances $300 million bonds at lower rate

MANILA, Philippines — State-run Development Bank of the Philippines (DBP) managed to refinance its $300-million bonds with a 10-year maturity at a more favorable rate after its return to the international debt market in a decade.

In a report to the Department of Finance, JP Morgan, one of the joint managers and bookrunners for the offering, said the yield difference between the debt papers and US Treasuries was narrower at over 97.5 basis points compared to a yield spread of 225 basis points over US government securities when it was issued in 2011.

The bank raised $300 million from its global bond offering in 2011 when the notes fetched an average rate of 5.5 percent.

The bank then refinanced the notes in time for maturity on March 25, this time fetching a yield of 2.421 percent.

“DBP and the Philippine government were able to score “another big win” with the bond refinancing last March 2, “despite a volatile past week on the back of weaker equity markets and large US Treasury rate swings,” said JP Morgan in the note.

The offer was the first US-dollar denominated bond sale by a Philippine issuer and the first US dollar senior public issuance from a Southeast Asian bank this year.

JP Morgan said the offer saw strong demand from institutional investors.

“While investors had initially exhibited price sensitivity due to the volatility in rates, the transaction was eventually priced at T+97.5 bps to yield 2.421 percent,” it said.

“DBP was able to time the market and capitalize on the stronger market backdrop to launch its global roadshow on March 1 and subsequently price a successful transaction the following day.”

Fitch earlier assigned a ‘BBB (EXP)’ expected rating to the issuance, the same with the bank’s other long-term issuances, citing its strong ties with the Philippine government.